Day: May 15, 2019

Property investment is ranked fourth in the list of most common investments, preceded by cash, bonds and shares. There are plenty of reasons to invest in a property – maximise tax returns, to get loans against and to add an extra source of income to the household.

For budding businesses, property investment can supplement them with the income to grow the business further. While most business owners will put their profits back into the business, it is wise to keep some funds aside for property investments.

Property investment can be done in many forms – buy-to-rent, investment trusts, REITs etc., and each has its plus or minuses. The return on investment also depends on what type of property you are putting your money into, like residential, commercial, retail, or industrial. Education is the key; hence in today’s article we will look at different types of property investments, the pros and cons for each, best practices to follow and a few market trends to get you started.

Let’s start with global market trends. We won’t get into the nitty gritty details as that would be a whole other article by itself. Here are some key highlights from across the globe – Trump’s administration has not only affected the growth of America, but has also caused economic activity to suffer across the globe. Increase in the interest rates has slowed down property buying in the US; the rental market however will see bright days ahead. When it comes to Europe, Brexit may cause the Eastern and Central European property market to surge. Lisbon is the hotspot to invest in, in 2019. In Hong Kong co-living is on the rise. Foreign investments become easier in Cape Town, where as local investment becomes difficult. Property market in Australia takes a hit, where as in New Zealand, the market is in good shape and is predicted to grow further.

Now moving on to popular property investment types and how they fare against each other.

Property investments are divided into two categories – direct and indirect.

Direct investment

Direct investment is when you buy the property directly, either to give it on rent or to sell it in the future for a profit. Indirect investments in when you invest in property fund. In this case you don’t own the property,you hand over your funds to fund manager or a investment company who in turn invests them into a property or in property funds.

Investment of any kind comes with a risk, the only difference is the scale of that risk. Fixed investments, saving accounts, cash investments are generally considered low risks, whereas property investments and share are considered high risk due. Property investments, whether direct or indirect, will yield you returns in the long term as the market fluctuates intermittently. It is always advised to diversify your investments, or more simply put, do not put all your eggs in one basket.

Buying property directly, whether to rent or sell, comes with its set of risks, and some of them are as follows:

– Buying any property requires a substantial sum, even if it’s something small like a shipping container home. And unlike other assets, it takes a long time to sell a property and make a profit.

– You are investing a high amount in a single asset, so it is a big commitment, and bigger the commitment, the bigger the risk.

– You need to go through agents, fees, stamp duty, taxes, conveyance fees etc. in order to transact when buying or selling the property, these are a few things most don’t take into account and are later blindsided by.

– Maintenance of a property is a time consuming and a costly affair.

– Loans and mortgages are commonly used to buy a property, and these come with even more risks. There is no guarantee one will possess enough money to recover the loan, or if the cost of mortgage goes up and if one fails to pay the instalments, the banks or the mortgage provider can take the property away.

Indirect Investment

There are several options when it comes to buying a property indirectly – property trusts, investment trusts, REITs, Insurance property funds, offshore companies or shares in listed real estate companies are some of them.

Indirect property investments requires low capital investment and hence is assessable to individuals who want to invest in a property but do not have sufficient income to buy one or do not want the commitment that comes with buying a property. This gives them an opportunity to dabble with the market, with a significantly smaller sum. The fund is managed by professionals with years of experience behind them and who can read the markets better than a layman. Professionals often diversify their investment so as to lower the risk of any major loses.

While professionals know what they are doing, it does come with the downside of not having as much control on your investment as it would if you were investing it personally. Hence, trust and reputations are important when investing with a professional. Their experience and market know-how and ability to predict market fluctuations is what will eventually determine the returns you get on your investment, so choose wisely. Here are some of the largest property management companies in New Zealand to help your search.

Last but not the least, investing in a property means investing long-term, and for this asset to hold its shape long term, regular maintenance is required. This means getting the house pest-controlled ever so often, getting renovations done, making additions to increase its resale value, and in case of buy-to-let, getting rental appraisals done in order to get the maximum benefit out of the investments. You’ll also need to keep a list of emergency local authorities (local city corporations, police, fire-department, local housing co-corporations, flood cleanup companies, natural disaster corporation etc) and hiring a caretaker for your properties overseas or those that falls in other states or region than the one in which you reside.

Investing in a property is not easy, and certainly not cheap, so in order to make an informed decision, look for professional advice wherever possible. Take the time to do your research, and do not make hasty investments, and most importantly be patient through the process!

Many bills have been passed in the past few years to ensure that the tenants in New Zealand are privy to a warm, clean, weather-proofed home. The latest bill was introduced in Sept 2018 by Housing and Urban Development Minister Phil Twyford. The bill was a reaction to the findings of research that suggested NZ’s rental houses are of lower quality as compared to owned homes.

As per the reforms the new standards are designed to improve the living conditions of the tenants and to set minimum standards for facilities that the landlord is required to provide. The ministry has made considerable efforts to make the 600,000 rented households happy and safe. This was a bid to promote healthy and fair renting conditions.

These changes have made the tenants jump with joy, but have made the landlords a little wary. The latest set of changes have increased the weather-proofing standards and have eliminated letting fees, which has left a lot of homeowners bewildered as to where they stand on their investment. This article will shed light on the latest healthy homes standards laid out by the Housing and Urban Development Ministry.

HEATING

The rented properties should now be facilitated with fixed heating devices that are capable of achieving a minimum temperature of 18 degrees. It was observed that a chunk of rental homes had inadequate heating facilities. In New Zealand, as high as 22% of rented homes have unhealthy or unaffordable heating. To ensure the standard is met, an online tool will be released to measure the heating requirements for the living room. The minimum size that the online tool will approve of is 1.5 kilowatts.

INSULATION

It is found that many homes do not have adequate insulation, which plays an important part in retaining the heat inside the walls and keeps the space warm and dry. Homes with below standard insulation are cold and damp which in turn can cause mould and moss to grow on walls, ceilings and other damp places around the house.

As per the new standards, for newer constructions, the insulation must meet the standards set by the 2008 building code and for the existing ones, it must be above 120mm in thickness. For the owners who have met the standards set by the 2016 building code will require no further action on their part. This regulation is aimed towards rentals that were not required to upgrade as per the 2016 act. It is also in favour of the landlord to invest in insulation as mould or moss treatment is much more of a hassle. It also helps prevent legal hassles in case the tenants suffer health hazards due to the mould or the moss.

VENTILATION

As per the latest standards, the houses must have windows that open in all the major rooms of the house – the living room, dining room, the kitchen and the bedrooms. The bathrooms and the kitchens must be fitted with adequately sized extractor fan/fans in order to expel moisture. This step is taken once again to ensure the house is free from moisture and dampness so that mould does not affect the health of the tenant. It can also be detrimental to the health of the structure; it can damage walls, ceilings, floors and the possessions of the tenants.

The fans are recommended over opening windows in the shower or bath as it is sometimes not possible due to security reasons or bad weather to do so, hence mechanical ventilation such as extractor fans and range hoods are preferred.

DRAINAGE

Most houses in NZ suffer from lack of proper drainage and moisture ingress facilities. Moisture can enter the house due to leaks, water pooling, and rising damp. As per the new standards, all of this changes. A landlord has to place high standard drainage and guttering, downpipes and drains.

And for a house with an encased subfloor, the landlord must have ground moisture barrier installed if the structure allows. Maintenance of the drains should not be neglected, and though not mandatory, employing a gutter cleaning service periodically can improve the health of the drainage system.

DRAUGHT

One of the reasons why heating a house is expensive is that sometimes the structures have draughts. Fixing a draught will cost a small sum to the landlord, which will, in turn, save the tenants from hefty heating bills. The homeowners will have to fix any unnecessary gaps and holes in the walls, ceilings, floors, doors and windows, which can cause apparent draughts. They must also seal unused chimneys and fireplaces for the same reason.

THE TIME FRAMES

The ministry has laid down certain deadlines that the landlords have to get the upgrades done within:

July 1st, 2021 – The private landlords have to ensure they meet all the requirements listed in the healthy home standards within 90 days from any new occupancy.

July 1st, 2021 – Is the date by which all the boarding houses have to meet the standard set by the HHS.

July 1st, 2023 – Registered Community Housing and houses under All Housing New Zealand must comply with HHS standards.

July 1st, 2024 – Each and every rental home must comply with the HHS standards.

The new standards have come in to place to address the long pending issue of the low-quality rentals that plagues most of New Zealand. It exempts tenants from any maintenance issues and holds the landlords accountable for their assets.

Our advice to the landlords would be to meet these basic standards of living, which are quite cost-effective and once met will only yield them higher rents. Getting the house weatherproofed, getting roof cleaning done, getting foundational problems fixed, and getting a paint job done routinely, are some common maintenance measures that can contribute towards the health of a home and keep both the tenant and the landlord happy. Tenants should get a building inspection done before buying the house to ensure that not only these standards laid by HHS are met, but also to gauge other flaws in the structure before signing a contract.

Let’s start with the basics. To pick the right rental property, be it brand new homes or old fixer-uppers, you need to know what you are investing into, how you intend to recover the costs and the benefits that come with it.

An investment property is essentially any real estate that is not bought with an intention to use or inhabit. These are generally bought with the intention of getting the returns by flipping, renting or holding it until the market goes up to make a profit on the selling price. A rental falls under the category of an investment property.

A rental is a property that the investor buys with the intention of renting it, in order to gain returns in terms of monthly paychecks. Rentals can be of different types – residential, commercial, retail, etc.. Single-family homes, apartments, duplexes, and similar properties fall under residential rental properties. The tenants generally lease the property for a longer duration as compared to the commercial tenants. Such properties are generally owned by individuals or families. Commercial rentals can consist of properties used for commercial purposes, where the tenants occupy the property short term; this includes properties such as hotels, motels, office complexes, and retail warehouses. These are generally owned by large corporates.

Now that you know what a rental is, it’s time to know how to pick the right one! We’ve listed down some tips to make this monumental task a little bit easier.

INVEST IN A SINGLE FAMILY HOME

Test the waters before you dive in. A single family home is easier to maintain, costs less and is easier to rent out as compared to a multi-family property. The house has less wear and tear as you only have a single tenant. It will allow you to dabble with book-keeping, repair, and other duties that a landlord bears, to see if you are cut out for it before taking on a larger project. Bigger properties also mean more taxes and more maintenance costs, and the supplementary rental income you make may not cover these costs. So, start small!

TIMING IS EVERYTHING

Buying any property cost big bucks, so a thorough evaluation of your finances is needed before you take the leap. Don’t invest because the top investment gurus say so in their webinar. Always assess the situation at hand, and make an honest evaluation of your financial standing. Here are a few points to consider.

– Will investing in a home/property affect your daily finances? In other words, can you continue to live a comfortable life after this substantial investment?

– Is your down payment of 20% taken care of? This is likely the minimum you would need to get financing.

– Have you taken into account the closing costs?

– Would you be able to take on any repair or unforeseen expenses before you rent out the property and be able to make the monthly bank or mortgage payments

– Can your primary residence (if you have one) be used for financing?

If you are hesitant over any one of these points, hold off until your sort the issues and only then invest in a property.

LOCATION IS KEY

Property investment is a long term investment, thus it requires extensive research and planning. You can never research enough while buying your first rental. Job, population and infrastructural growth are the three markers that you should look at while researching for the ideal location. Let’s take a quick look at each of these in more detail.

Increase in the number of jobs:What makes a strong real estate market? Economic stability. What contributes towards it? Increase in the number of jobs in the market. The logic is simple, more jobs = inflow of potential workforce = need for housing + better financial standing = favourable market conditions.

Population Growth: Take any major city as an example, and one of the prominent reasons for the real estate boom in that city is most likely to be a population explosion. When demand exceeds supply, the market is tipped towards the seller and provides the seller with opportunities to capitalise on these favourable conditions.

Infrastructural Growth: The growth of the city and the above-mentioned points go hand in hand. As the infrastructure in the cities gets better, the standard of living and means to earn a livelihood improves, which attracts more and more people to that market, making it ‘THE’ location to invest in.

To find a location that would meet the above criteria requires extensive research and know-how of the real estate market. Getting professional help is recommended.

UNDERSTAND MORTGAGE

The majority of homeowners use a mortgage to buy a property, hence it is important to understand how it works in order to bring down your costs. Using leverage to borrow against will free up some of your finances which you can then use towards repairs and other expenses. It’s best to hire a refinance lawyer to read between the text in order to avoid any legal pitfalls.

DO A THOROUGH BACKGROUND CHECK

You bought a rental to rent it out to tenants, which makes them the significant other in this equation. If you want your rental to work, doing a thorough background check on your tenants is important to avoid future hassles. You can do this by checking their credit score and the landlord-tenant records in your area. Set down certain expectations right from the start, always in writing to be doubly insured. The next step is to contractualise the deal, and hiring conveyancing solicitors to draw up your legal papers is always a good idea, even if it means shelling out a little extra.

MAINTAIN A GOOD RAPPORT WITH THE TENANTS

No one wants a landlord from hell. While it is important to draw boundaries and set rules, don’t be unreasonable. Abide by the local rental regulations. Develop a rapport with the tenants. Help them out by suggesting friendly movers. Don’t ghost out once the deal is closed; be attentive to maintenance and repair requests and always value good tenants. It takes two to tango so make sure you are in tune.

These top tips will help you not only purchase your rental property, but make it a successful purchase that will reap long term rewards!

Looking to move? This time can be both extremely exciting and stressful, and often we feel both about the same things! You might be looking for a new suburb to live in because your current location leaves something to be desired in one way or another, but finding a new one to live in can be almost just as stressful as it is exciting. Lucky for you, we have put together a comprehensive list of just about everything you should think about before choosing a new suburb to live in. There’s plenty to consider, so buckle up and dive in to this list of how to choose the right suburb to live in.

First things first, it’s important to list your priorities. It’s way too easy to get wrapped up in a gorgeous house or flat and totally forget about the neighbourhood that it’s in. Sometimes after visiting a new place with a rental property manager, it can be tempting to go on a gut reaction and immediately say you’re interested. For this reason, it’s vital that before you even start looking and getting carried away with your search that you sit down and figure out what’s most important to you.

For example, what comes first in a neighbourhood? Is it safety, or perhaps proximity to work? Are you looking for great schools, or easy access to public transportation? Take some serious time to think about what you want from a suburb, and then rank them from top to bottom of priority.

Let’s go through some of the top priorities you might have.

What are the crime rates?

This one rings especially true for those who are already in bad neighbourhoods. Perhaps you’ve had to recently install CCTV after a recent break-in or scare, or you don’t feel safe walking home at night, or letting your children play outside after dark. Many studies have shown that “bad neighbourhoods”, or rather those filled with crime or substance abuse and drug use have an impact on children’s behaviour.

For this reason, many families find that a safe and welcoming neighbourhood is the top of their priority list when moving to a new suburb. There are usually free tools online to look at crime rates in a neighbourhood, so get studying to ensure your new home is a safe home. If you will be renting in the new suburb, have a chat with the property manager as well to see what kind of safety the building itself has as well. Are there 24/7 locksmiths available onsite, and how are first floor flats secured, are questions you should be asking.

What’s the distance to family and friends?

Moving away from family and friends can be really hard, especially if you’re moving far. Even if it’s just to the opposite side of town, however, it can be just as saddening if you are currently close to everyone. The ease of dropping by for a cuppa or having a reliable neighbour to keep a spare key to your house is of priceless value, so for some, this is an important priority for moving to a new suburb. Consider what you may lose or gain by moving closer or further away to people you love, and factor that in to your decision.

What schools are in the district?

For most families, choosing a suburb in a good school district is extremely important. Many people move purely for this reason. Start with a website like this one to figure out what schools would be in your new area, and then do your research on the available schools to find the one that works best for your children.

How hard will it be to move?

Moving to a further away place will be stressful, so determining how hard it will be to move might have a determining factor in your suburb choice. For example, will you need to hire a long distance moving and storage company to help you out? This can definitely make the move easier, but will cost more than you might have budgeted for in moving.

What is the area like?

Remember to spend time in the area before you commit to a suburb. Get lunch at a local cafe, go for a walk in the nearby park and have a picnic. Visit the supermarket if you can, and see how long of a walk it is to the nearest coffee shop. If these are things you love and are used to now, it’s important that you see if this new suburb will offer the same, or if you can get by without things like restaurants within walking distance.

Are there new builds?

For many, the future resale value of the home is very important. Many with this as the top of their priority list might look in a newly developing area, or new subdivisions. Pay special attention to construction sites to see what’s being built, and perhaps talk to the local council to inquire about any new large development plans.

What kind of access is there?

If you plan on relying on public transportation, this one should be high on your list. Look at your basic routes of going to work or the supermarket, and see how long it will take you from the possible suburb. If you do a lot of travel for work or pleasure, look into how long it will take you to get to the airport as well. While it might not seem as important as things like schools or crime rates, we promise that after a few weeks of spending hours on several buses, you’ll have wished you looked this up before.

Once you’ve completed your list of top priorities, it will likely be a whole lot easier to narrow down the best suburbs for you. Not only that, but with a bit of work in completing your list, you’ll feel much more confident in finding the right area, and secure in whatever choice you make. Good luck with the move!

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